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Rural Development

ECONOMIC EMPOWERMENT OF RURAL WOMEN BY SELF HELP GROUP THROUGH MICRO CREDIT

A self-help group (SHG) is a village-based financial intermediary usually composed of 10–20 local women or men. A mixed group is generally not preferred. Most self-help groups are located in India, though SHGs can also be found in other countries, especially in South Asia and Southeast Asia. Members make small regular savings contributions over a few months until there is enough capital in the group to begin lending. Funds may then be lent back to the members or to others in the village for any purpose. In India, many SHG's are 'linked' to banks for the delivery of micro-credit.

Micro-credit is the provision of financial services to poor people. It is the extension of small amounts of collateral- free institutional loans to individuals or to jointly liable group members for their self-employment and income generation. The innovative scheme of micro financing has transmitted the real economic power in the hands of women through Self Help Groups (SHGs) and has significantly reduced their dependence on men. This has helped in empowerment of women and economic independence of women. The experiences of several SHGs (Self-Help Groups) reveal that rural poor are actually efficient managers of credit and finance. Availability of timely and adequate credit is essential for them to undertake any economic activity rather than credit subsidy. Banking for the “unbankable” through Social Health Groups is a valuable contribution to development planning as it presents an alternative development tool. SHGs have the potential to remedy many of the deficiencies of the formal banking system in rural areas and to empower women economically and socially by acting as a bridge between women living in poverty and the formal financial sector. This gradual and evolutionary growth process has given a great boost to the rural poor in India to reach reasonable economic, social and cultural empowerment, leading to better life of participating households.

Impact of Microfinance programmes and the role of SHG: Empowerment in the context of women’s development is a way of defining, challenging and overcoming barriers in a woman’s life through which she increases her ability to shape her life and environment. It is an active, multidimensional process which should enable women to realize their full identity and power in all spheres of life. Empowerment can give power to women to have control over the circumstances of their lives. Empowerment of women is critical not only for their own welfare but also for the development of the country. Empowering women through education, ideas, consciousness, mobilization and participatory approach can enable them to take their own decisions, make them self-reliant and self-confident.

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If the goal of a microfinance programme is to empower women, the path to take would be quite different from one where the explicit goal is poverty reduction or credit provision alone. The latter orientation leads to a supply orientation, whereby the effort is to provide micro credit to women. This can lead to empowering effects, but can also lead women in to more indebtedness, without giving them improved access to cash and other productive resources.

Goals : Self-help groups are started by non-governmental organizations (NGOs) that generally have broad anti-poverty agendas. Self-help groups are seen as instruments for a variety of goals including empowering women, developing leadership abilities among poor people, increasing school enrollments, and improving nutrition and the use of birth control.Financial intermediation is generally seen more as an entry point to these other goals, rather than as a primary objective. This can hinder their development as sources of village capital, as well as their efforts to aggregate locally controlled pools of capital through federation, as was historically accomplished by credit unions.

Structure: A self-help group may be registered or unregistered. It typically comprises a group of micro entrepreneurs having homogeneous social and economic backgrounds, all voluntarily coming together to save regular small sums of money, mutually agreeing to contribute to a common fund and to meet their emergency needs on the basis of mutual help. They pool their resources to become financially stable, taking loans from the money collected by that group and by making everybody in that group self-employed. The group members use collective wisdom and peer pressure to ensure proper end-use of credit and timely repayment. This system eliminates the need for collateral and is closely related to that of solidarity lending, widely used by micro finance institutions. To make the book-keeping simple enough to be handled by the members, flat interest rates are used for most loan calculations.

Profile of Micro credit services by various Agencies in India: The Indian micro credit sector is characterized by a variety of micro credit service providers. These include various apex financial institutions like SIDBI and NABARD, Government owned Societies like Rashtriya Mahila Kosh, formal sector financial institutions, Commercial Banks, Regional Rural Banks, in addition to member-based institutions like Cooperative, Mutually Aided Cooperative Societies, SHG Federations, private sector companies like specialized NBFCs, Societies,Trusts,  BASIX :BASIX is a livelihood promotion institution established in 1996, working with over a million and a half customers, over 90 percent being rural poor households and about 10 percent urban slum dwellers.BASIX works in 15 states - Andhra Pradesh, Karnataka, Orissa, Jharkhand, Maharashtra, Madhya Pradesh, Tamilnadu, Rajasthan, Bihar, Chattisgarh, West Bengal, Delhi, Uttarakhand, Sikkim and Assam and over 10,000 villages. It has a staff of over 3500, of which 80 percent are based in small towns and villages. BASIX mission is to promote a large number of sustainable livelihoods, including for the rural poor and women, through the provision of financial services and technical assistance in an integrated manner. BASIX will strive to yield a competitive rate of return to its investors so as to be able to access mainstream capital and human resources on a continuous basis. BASIX strategy is to provide a comprehensive set of livelihood promotion services to rural poor households under one umbrella. BASIX and many of the bigger micro-finance companies are working with insurance companies to innovate products suited to regions and types of livelihoods of their clients.

BANDHAN: Bandhan, the Kolkata-headquartered micro-finance institute (MFI), opened its first microfinance branch at Bagnan in Howrah district of West Bengal in July 2002. Bandhan started with 2 branches in the year 2002-03 only in the state of West Bengal and today it has grown as strong as 670 branches across 10 states of the country! The organization had recorded a growth rate of 500 percent in the year 2003-04 and 611 percent in the year 2004-05. Till date, it has disbursed a total of Rs. 1,759 crores among almost 13 lakh poor women. Loan outstanding stands at Rs. 547 crores. The repayment rate is recorded at 99.88 percent. Bandhan has staff strength of more than 3,980 employees. Bandhan is working towards the twin objective of poverty alleviation and women empowerment. It started as a Capacity Building Institution (CBI) in November 2000 under the leadership of Mr C. S Ghosh.

MYRADA: MYRADA was originally the acronym of the Mysore Resettlement and Development Agency, but the official name is now MYRADA. It is a large NGO with 487 staff working directly with 1.5 million poor people. “Building poor people’s institutions” is its short mission statement. MYRADA has founded a microfinance institution (MFI) called Sanghamithra, which lends exclusively and directly to SHGs. It is also involved with bilateral and multilateral organizations in Myanmar, Cambodia, Indonesia, East Timor, Viet Nam and Bangladesh, largely in promoting the self-help group strategy and participatory approaches to natural resources management.

SPANDANA: Spandana is one of the fastest expanding microfinance institutions in the country. It is not only amongst the largest MFIs, but also the most efficient in the country with an operating expense ratio of 5.5 percent on portfolio. Spandana has achieved this remarkable distinction in a short span of just under a decade since its inception in 1998. This has been possible on account of its highly focused and clearly structured operations. Spandana has continued to successfully manage growth with operations now spanning 8 States Andhra Pradesh, Karnataka, Tamil Nadu, Orissa, Maharashtra, Chattisgarh, Madhyapradesh and Rajasthan. It now boasts of a client base that constitutes almost 1.5 percent of the BPL population of India.

SKS Microfinance: SKS Microfinance launched in 1998, and it is one of the fastest growing microfinance organizations in the world, having provided over US $ 1.3 Billion (6,640 Crore) and has maintained loans outstanding of US$ 451 Million (Rs 2,284 Crore) in loans to 3,953,324 women members in poor regions of India. Borrowers take loans for a range of income-generating activities, including livestock, agriculture, trade (such as vegetable vending), production (from basket weaving to pottery) and new age businesses (Beauty Parlor to photography). SKS also offers interest-free loans for emergencies as well as life insurance to its members. Its NGO wing SKS foundation runs the Ultra Poor Program.SKS currently has microfinance branches in 18 states across India. SKS aims to reach 15million members by 2012. In the last year alone, SKS Microfinance has achieved nearly 170 percent growth, with 99 percent on-time repayment rate.

Rashtriya Mahila Kosh (RMK): It was set up in March 1993 as an independent registered society by the Department of Women and Child Development in Government of India’s Ministry of Human Resource Development with an initial corpus of Rs. 310,000,000 - not to replace the banking sector but to fill the gap between what the banking sector offers and what the poor need. It is a tool for empowerment of the poorest; the delivery is normally through Self Help Groups (SHGs). It also playsan important role for promoting self-employment. It is not just a financing system, but a tool for social change, especially for women, it does not spring from market forces alone.

Vazhndhu Kaattuvom: The objective of the Tamil Nadu Empowerment and Poverty Reduction Project – called “Vazhndhu Kaattuvom” locally, meaning “Let’s show how to live” – is to create economic opportunities and build social capital in the poorest communities.

SAVINGS AND MICRO CREDIT:

Thrift is a very important indicator of a group’s success because consistent growth in thrift is a clear indication of the growing confidence of the members in the group. Collection of thrift is a major activity of the SHGs. The poor who need money for purchase of various consumption goods quite often meet their contingencies by borrowing from professional money-lenders and others at high rates of interest. SHGs have been extremely effective in creating the habit of savings among the rural poor and mobilizing it for common good. The members of the SHGs starting with fixed quantum of savings are motivated to increase their savings in a phased manner and are involved in credit  activities with all the members.

Advantages of financing through SHGs

• An economically poor individual gains strength as part of a group.
• Besides, financing through SHGs reduces transaction costs for both lenders and borrowers.
• While lenders have to handle only a single SHG account instead of a large number of small-sized individual accounts, borrowers as part of an SHG cut down expenses on travel (to & from the branch and other places) for completing paper work and on the loss of workdays in canvassing for loans.

Problems faced by micro entrepreneurs: 88 respondents said they were unaware of the programme. 99 women responded that they faced the problem inadequate assistance of amount. 87 respondents said that they were lacking in the knowledge in identifying the product/trade. 144 respondents said that they were feeling that the rate of interest charged by the group is high. 74 respondents said that they face inadequate marketing facilities to promote their products. 120 women said that they were lacking of training in maintaining the assets. 114 respondents said that they were lacking in training on credit management. 110 respondents said diversion and misuse of loans is their problem faced by them. 60 members said that there were facing the problem of non availability of infra structural facilities. Significant relationship observed between years of membership and Lack of awareness of the programme, Inadequate assistance of amount, Lack of knowledge in identifying the product/trade, High rate of interest charged by the group.

NABARD's 'SHG Bank Linkage' program

Many self-help groups, especially in India, under NABARD's SHG Bank Linkage program, borrow from banks once they have accumulated a base of their own capital and have established a track record of regular repayments.

This model has attracted attention as a possible way of delivering micro-finance services to poor populations that have been difficult to reach directly through banks or other institutions. "By aggregating their individual savings into a single deposit, self-help groups minimize the bank's transaction costs and generate an attractive volume of deposits. Through self-help groups the bank can serve small rural depositors while paying them a market rate of interest."

NABARD estimates that there are 2.2 million SHGs in India, representing 33 million members, that have taken loans from banks under its linkage program to date. This does not include SHGs that have not borrowed. "The SHG Banking Linkage Programme since its beginning has been predominant in certain states, showing spatial preferences especially for the southern region – Andhra-Pradesh, Tamil Nadu, Kerala and Karnataka. These states accounted for 57 % of the SHG credits linked during the financial year 2005–2006 SUGGESTIONS: Training is the backbone of the SHGs. The financing aspect of encouraging low-income people to start small businesses has received too much emphasis at the expense of training. Women in SHGs require awareness programmes focusing on gender sensitization, legal rights, nutrition, and health. Business training can benefit poor women entrepreneurs when it is carefully designed to complement their existing skills and address their most pressing needs. Training should focus on the practical aspects of women entrepreneurship. With the help of
market research and other tools to ensure relevance for clients, business training can be a valuable component of micro-lending programmes. Like NGOs other institutions should come forward to address the serious issues of SHG members such as awareness, education and training. An integrated system could be developed harnessing all the available communication media including newspapers, radio, television and internet in order to provide rural women entrepreneurs in SHGs.

Source- With inputs from Prof PSR Murthy, Social Science Research Network

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